Build-to-Rent’s Growing Appeal to Multifamily Investors

If you're a landlord or considering purchasing a rental income property, consider a debt service coverage ratio (DSCR) loan to fund your next purchase. A DSCR loan is specifically designed to finance rental properties and can be easier to qualify for than a conventional mortgage, as it leverages the property's cash flow instead of a buyer's income, tax returns, and W-2. This article will cover the finer points of DSCR loans, including their requirements, qualification process, and flexibility for real estate investors.   What is a DSCR Loan? DSCR loans are mortgages secured by the property's rental income and do not require the buyer to provide the same documentation needed with a mortgage for owner-occupied properties. This feature is especially helpful for self-employed investors who may not have a conventional income stream or have been challenged to obtain financing through traditional banks. DSCR loans are specifically designed for residential income-producing properties and are quickly becoming the preferred option for investors purchasing income properties. Still, there are some considerations regarding DSCR loans: Only properties with one to four units are eligible for DSCR lending, as additional units in the building would classify it as "multi-family." Most DSCR lenders prefer turnkey or stabilized properties, though some allow light rehab if the property is leased or stabilized quickly. Lastly, the property must be a business asset or income investment, meaning the owner cannot reside at the address.   How DSCR Loans Are Calculated DSCR loans are based on a calculation that assesses the property's potential to cover its expenses. The calculation divides the property's net operating income (NOI) by its total debt service (TDS) to obtain a number less than, greater than, or equal to 1.0.   DSCR = Net Operating Income (NOI) / Total Debt Service (TDS)   Net operating income is calculated by subtracting the total operating expenses from the gross rental income. Total debt service refers to the sum of all debt-related costs that the property is required to pay. The DSCR ratio is what tells the borrower and lender how much income the property is generating to cover (or not cover) its own expenses. DSCR > 1 means the property is generating enough income to cover its debt. DSCR = 1 means the property is just breaking even with enough income to cover its debt. DSCR < 1 means the property isn't generating enough income to cover its debt, posing a greater risk for lenders.   For Example: DSCR = $150,000 / $100,000 = 1.5   This means the property generates $150,000 in income, with total expenses equal to $100,000. This results in a DSCR of 1.5, so the property yields 50% more income than what's needed to cover its debt, making it a more acceptable threshold for a lender to consider financing.   DSCR Loan Requirements: What Lenders Look For + Refinance Outlook Recently, rates have eased into the mid-6% to 7% range on average, and liquidity from non-agency or non-QM channels has improved. At the same time, rents are increasing unevenly by metro area, and insurance costs remain elevated in some counties. Key factors driving uneven rent increases can include: Supply and demand. Migration patterns. Construction costs. Location desirability. Inflation. Post-pandemic changes. All of this is reflected in today's DSCR underwriting. Lenders are pricing more competitively than in previous years, but they're also scrutinizing expenses such as taxes and homeowners' insurance that impact cash flow. Core DSCR requirements (what you'll typically need) and LendingOne's impact: Property & use: 1-4 unit single-family rentals (SFRs), townhomes, condos, and planned unit developments (PUDs); investment use only (non-owner-occupied). DSCR threshold: Many programs target a DSCR of ≥1.10-1.20, depending on the credit; some offer options for break-even or even sub-1.0 DSCR with compensating factors. Example: LendingOne's core grid lists 1.10-1.20 minimums by FICO; separate programs advertise flexibility for break-even and negative cash-flowing properties. Always confirm program-specific guidelines. Leverage: This is program-dependent, but LendingOne, for example, offers up to 80% LTV on purchase or rate/term refi; up to 75% LTV on cash-out. Credit & experience: Program minimums vary; one representative grid shows a minimum FICO score of 680, with stronger credit resulting in a lower required DSCR and potentially reduced reserve needs. Some programs require experience with existing investment properties. Reserves & payment structure: Expect reserves (e.g., ~9 months PITIA), with portions sometimes collected at closing and potential waivers for higher FICOs. Prepayment options often include 1-5-year step-downs, which is vital if you plan to refinance. Appraisal & rents: Full appraisal with 1007 rent schedule; lenders qualify using the lesser of actual or market rent (caps may apply). Insurance & escrows: Escrows for taxes and insurance are standard. Hazard insurance (and flood, if applicable) is required; many lenders also require rent-loss coverage (e.g., six months). Rising premiums, especially in high-risk counties, can tighten DSCR, so get quotes early.   DSCR Loan vs. Other Investment Property Loans Choosing the right loan comes down to how the deal cash flows, how quickly you need to close, and how much documentation you are willing to provide. Of course, this is easier said than done, and verifying many variables can get overwhelming. This is how DSCR loans compare with other standard options. This table focuses on general patterns across lenders. Terms vary by program and market.   Loan type Qualifying focus Docs & credit Typical LTV & term Rate & fees (relative) Best fit DSCR Rental loan Property income (DSCR) is more than the borrower’s DTI Appraisal + rent schedule; credit & reserves reviewed ~75–80% LTV; 30-year fixed or ARM; IO options Higher than conventional; lower than most short-term loans Long-term holds when you prefer property-based underwriting Conventional (agency) investment mortgage Personal income & DTI Full income and asset docs; strong credit needed LTV caps vary by units and purpose; 15–30-year terms Lowest if you fully qualify Lower-cost debt for well-documented borrowers Bridge loan Asset + exit plan (sale or refinance) Appraisal and BPO; business plan; experience and liquidity Short term (~6–18 months); leverage varies Higher rates and points Fast acquisitions or seasoning before permanent debt Fix and Flip (rehab) loan After-repair value (ARV) and scope Budget, draws, inspections; experience helps Short term (~12 months); leverage tied to LTC or ARV Higher (construction risk priced in) Buy-rehab-sell or refi to DSCR after stabilization Portfolio or blanket rental loan Portfolio cash flow (global DSCR) Rent rolls, consolidated financials, entity structure Often up to ~75% LTV; 5–10-year terms (balloon or fixed and ARM) Middle of the pack Operators consolidating multiple rentals under one loan Disclaimer: This information is provided for educational purposes. Always check the current guidelines, fees, prepayment terms, and local insurance and tax impacts before bidding or refinancing.   Should You Use a Direct Lender, Broker, or Bank for Your DSCR Loan? When financing a rental, the company you work with can significantly impact the speed, pricing, and amount of paperwork required. This is how the three options differ and when each is most suitable.   What Is a Direct Lender? A direct lender is the company that funds the loan itself. In plain terms: The lender makes the loan; a broker does not. Brokers act as intermediaries who help you shop with multiple lenders. How does this play out with DSCR loans? Direct lenders primarily underwrite based on the property's debt service coverage ratio, order the appraisal and rent schedule, and issue terms directly. Banks can also be direct lenders, but many DSCR programs are offered by non-bank lenders that specialize in investment properties. Banks engage in mortgage banking — originating, holding, or selling loans.   Example of a Direct Lender: LendingOne LendingOne is a direct private lender focused on real estate investors, offering DSCR rental loans among other investor products. It lends on non-owner-occupied 1-4 unit properties and provides an online application and borrower portal. For specifics on programs, see DSCR Rental Loans.   Comparing Direct Lenders, Brokers, and Banks Approval speed Direct lender: Often faster because underwriting, disclosures, and conditions stay in one shop. Broker: Timeline varies; brokers coordinate with a wholesale lender's underwriting. Bank: Processing may be slower due to more thorough documentation and portfolio or committee reviews. Loan Variety Direct lender: Deep menu of investor-focused products (DSCR, bridge, flip) within its own credit box. Broker: Broad market access; can shop multiple wholesale lenders for niche scenarios. Bank: Strong for conventional or agency and portfolio products; may have fewer DSCR options. Rates and fees Direct lender: Competitive for its programs; pricing set in-house. Broker: Can help you compare offers; broker compensation and fees may apply in addition to lender fees. Bank: Often sharp pricing if you qualify under bank or agency rules. Documentation Direct lender: DSCR loans emphasize property income (from leases and market rent) plus credit, reserves, and entity documents. Broker: Documentation depends on the target lender's program. Bank: Heavier personal income and DTI documentation for many programs. How to Decide Choose a direct lender if you want a streamlined DSCR process and clear, program-specific guidance from the funding source. Choose a broker if you want help shopping for multiple DSCR and investor programs with a single intake. Choose a bank if you easily qualify for conventional or portfolio terms and want potential relationship pricing or servicing under one roof.   Financing Options for DSCR Loans Within DSCR financing, loan structure directly impacts payment stability, cash flow, and when it makes sense to refinance. Here's what investors should keep in mind: Fixed-rate (usually 30-year): Stable payment for the full term; good for long holds and budgeting. Often starts a bit higher than ARMs; you'd refinance to benefit from future rate drops. Adjustable-rate (5/6, 7/6, 10/6 ARMs): Offers a lower start rate, which is fixed for an initial period; then adjusts with caps. Works when you plan to sell or refinance in 3-10 years or expect rates to ease. Interest-only (IO) periods: Interest only for 5-10 years, then amortizing. Improves near-term cash flow and DSCR; no principal paid during IO; payment jumps when amortization begins. Some lenders size DSCR to the post-IO payment. Term & amortization: 30-year standard; some offer 40-year with an IO period. Confirm which payment (IO vs. post-IO) is used to qualify. Down payment/LTV: Purchases typically have a 75-80% LTV (approximately 20-25% down). Cash-out refinancing often caps lower. Results vary by DSCR, credit, reserves, property, and market. Prepayment: Step-downs are common (e.g., 3-2-1 or 5-4-3-2-1). Match the penalty window to your hold period. Recourse, entity, assumability: Most close to an LLC with personal guarantees; non-recourse exists at tighter terms. Assumability is lender-specific and not always offered. Short-term rentals: Many programs allow STRs but may underwrite to market rent or an average history. Model higher expenses (management, cleaning, vacancy) in DSCR.   DSCR Loan Pros and Cons DSCR Pros Easier qualification for many investors: Underwrites to the property's cash flow rather than your personal income, tax returns, or W-2s — helpful for self-employed borrowers or those with complex finances. Faster path to scale: Because income docs are lighter, approvals can be quicker than traditional bank mortgages (still subject to appraisal and underwriting). Entity-friendly: Allows LLC or partnership ownership, making it straightforward to buy with partners and separate business from personal assets. Investment-focused: Explicitly designed for non-owner-occupied properties, aligning the loan with portfolio goals. DSCR Cons Higher cash to close: Down payments are often larger than conventional mortgages (and cash-out limits may be tighter). Pricing and fees: Expect higher interest rates, closing costs, and lender fees versus many bank and agency loans due to the risk profile and reduced personal income verification. Prepayment penalties: Many programs include a step-down prepayment, which can limit the flexibility of early sale or refinance. Not government-backed: Fewer protections than agency loans; terms vary by lender, and guidelines can change. Cash-flow risk: If rents soften or expenses rise, such as taxes, insurance, or HOA fees, the DSCR can fall below 1.0, increasing the risk of financial stress or foreclosure. Market fit matters: Not ideal for properties with unstable income or in volatile markets where vacancy or rent swings are common.   Is a DSCR Loan Right for You? DSCR loans offer incredible flexibility and are fast becoming the preferred loan vehicle for residential real estate investors today. Working with a lender well-versed in DSCR financing will give you the expertise and options you need to achieve your investment goals. Ultimately, DSCR loans may be a better option for self-employed investors, investment partnerships, or in scenarios where the property's income potential comfortably exceeds its expenses. However, a conventional mortgage may be a more suitable and affordable choice for first-time buyers or anyone who plans to live in the property. For more information, explore the loans available for your next real estate investment. CTA button: Speak with a LendingOne Loan Advisor  

During the Pandemic Housing Boom, flipping surged as skyrocketing price appreciation drew investors in. The 2022 interest rate shock ended that frenzy, forcing many newcomers out and leaving more seasoned operators to adapt to tighter margins. ​​In early 2025, our first-ever LendingOne–ResiClub Fix and Flip Survey showed a market still digesting the fallout from the 2022 rate shock. Activity had cooled from the pandemic, but many flippers said they still planned to do deals in 2025. In today’s article, we’ll share the full results from the LendingOne-ResiClub Fix and Flip Survey for Q3 2025. The flipper survey was fielded from August 20 to September 15, 2025. The results reveal many of the same themes as our Q1 2025 survey—but the story has evolved. "Our latest survey reveals a fix-and-flip market that is both resilient and realistic," says LendingOne CEO Matthew Neisser. "The broader macroeconomic environment, with elevated interest rates, higher inflation, and rising costs for materials and labor, has clearly ended the pandemic frenzy. However, the lack of housing inventory and the ongoing demand for updated homes have created a new landscape for experienced investors. They are continuing to find opportunities, particularly in the Midwest and Northeast, even as they face increased pressures. Meanwhile, flippers in the Southwest and Southeast, while seeing more market softness, remain optimistic about a market rebound. This strategic mindset, combined with a widespread plan to hold a portion of their flips as rental properties, highlights the adaptability of today’s professional flipper in a more challenging, yet opportunity-rich, environment." Total Number of U.S. Home Flips by Quarter Topline Findings  1. Home Flipper Sentiment and Intent  Shifts from Q1 2025:  Market sentiment is split but steady compared to Q1: 56% of U.S. home flippers describe their primary market as somewhat strong (44%) or very strong (12%). Expectations for demand have softened: 28% of flippers now anticipate weaker demand over the next year, up from 21% in Q1 2025. Fix and Flip Activity: A strong majority of flippers (88%) still plan to complete at least one project in the next 12 months. Nearly two-thirds (64%) of flippers plan to convert at least one project into a rental property. Market Outlook: 64% of survey participants expect the fix and flip market to stay the same (42%) or weaken (22%) in 2025.  Optimism runs the highest in the South: 41% of flippers in the Southwest and 42% in the Southeast expect their market to strengthen over the next 12 months—the highest among all regions. 2. Financial Considerations Renovation Costs:  Budgets vary widely, but Northeast flippers tend to spend the most, with half (50%) investing more than $100,000 per project. 56% of respondents say kitchen upgrades deliver the best ROI. 41% of U.S. home flippers report a typical margin of 20–29%. 3. The biggest concerns across U.S. markets, according to home flippers  Organization and timeline stress: Working with contractors continues to be one of the most challenging parts of fix and flip projects (28%), followed by staying on timeline (23%), obtaining financing (21%), and budget management (17%). Two-thirds (66%) of flippers say their projects typically take 4–6 months from purchase to resale. In the Northeast, however—where regulation is heavier—12% report project timelines of 10 months or longer. Regional variation and pain points: Nationally, competition for properties (28%) and interest rates (27%) are cited as the biggest current challenges. In the Northeast and Midwest, competition is even more acute, with 39% and 37% respectively naming it their top concern. The Midwest is viewed as the strongest region, with 23% of flippers calling their market very strong and 50% calling it somewhat strong. The Southwest is seen as the weakest region, with 17% describing their market as very weak and 43% as somewhat weak. How likely home flippers are to conduct a flip in the next 12 months. Q1 vs Q3 comparison. How flippers describe the current state of their primary fix and flip market. Q1 vs Q3 comparison. How flippers describe demand for fix and flip properties in their market over the next year. Q1 vs Q3 comparison. How many projects flippers plan to convert to rentals using the BRRRR method How flippers see the market evolving over the next 12 months How flippers describe demand for fix and flip properties in their market over the next 12 months Average budget flippers report for a renovation project Profit margins flippers report on completed projects Renovations that provide the best ROI Biggest challenges flippers face with fix and flip projects Timeline of flips from purchase to resale How flippers describe the current state of their primary market Biggest challenges flippers face in their current market

Real estate investment can be a marathon, not a sprint, and for Cedric, it was a journey of careful planning, calculated risks, and continuous learning. Alongside his wife Bea, Cedric has built a portfolio of four income-producing properties since 2017, evolving his strategy from a bold, sight-unseen purchase to a meticulously planned approach focused on cash flow and long-term appreciation. A Bold Beginning: Learning from a High-Risk First Step Cedric and his wife spent years considering real estate investment, poring over books and resources, before finally taking the plunge in 2017. Their very first transaction was an unconventional one: a tax sale auction. They purchased a property sight unseen, relying only on exterior photos available online. "We decided to hit the button and hit the gas pedal," Cedric recalls, describing the competitive bidding process. They won the auction, but the immediate thought was, "Okay, now what?" The property was in rough shape, requiring significant work. Adding to the challenge, they were living in a different state. After a 14-month process to secure a clear title, they sold the property for a profit of approximately $14,000, making a quick decision not to repeat that specific high-risk method. "It was definitely high risk," Cedric admits, acknowledging they "got lucky" that it worked out. This initial experience, though profitable, solidified their desire for a more traditional and manageable approach. Shifting Gears: Embracing Strategic Financing Following their initial, high-octane purchase, Cedric and his wife pivoted. They decided to leverage their existing knowledge from buying personal residences. Their second, third, and fourth properties, all purchased between January 2020 and February 2025, followed a more conventional path. Initially, they financed properties in their personal name through traditional, big bank lenders and directly with builders, then transferred ownership to their LLC. However, Cedric recognized the inefficiency of this multi-step process. He sought a direct solution, leading him to LendingOne. With LendingOne, Cedric was able to secure a DSCR loan, financing his fourth property entirely under his LLC from start to finish. This streamlined approach allows him to build his portfolio more efficiently. Today, all four of his properties are fully occupied rentals, managed by a dedicated property management company. Navigating Obstacles with Tenants Cedric has faced his share of challenges. The most significant occurred with a tenant in their first conventionally purchased property in 2020. After nine months of smooth sailing, the tenant became consistently late on payments. An eviction process was initiated, but the tenant caught up. However, the issue resurfaced three months later, eventually leading to the tenant moving out. While there was some minor damage, the relatively easy resolution was a "blessing." This experience prompted a shift in their tenant screening process. Cedric now meticulously tracks tenant history and targets individuals with a higher minimum credit score requirement. This adjustment has proven effective, leading to more consistent rent payments and fewer issues. Long-Term Vision to Scale Cedric, who recently retired, has clear long-term goals for his real estate investments. His short-term objective is to reach five properties in the next few years. Beyond that, he aims for the business to become self-sustaining. His strategy involves leveraging the equity from his existing properties as down payments for future acquisitions, aiming to grow his portfolio to at least 10 properties. This methodical expansion is designed to ensure continued cash flow and financial independence. Key Advice for Aspiring and Growing Investors Cedric offers four vital pieces of advice for those looking to get into or grow their real estate investment portfolio: Utilize a property management company: For handling day-to-day operations, rent collection, and eviction processes if needed. Timing is everything: Look to buy when the market is depressed, as he did during the onset of COVID-19 in 2020, which led to significant appreciation. Location, Location, Location: Focus on properties in good school districts (A-rated or 8/10+) and look for at least three-bedroom, two-bathroom layouts. Run the Numbers (Cash Flow is King!): Meticulously calculate all potential income against expenses (mortgage, insurance, HOA fees, property management) to ensure the property generates positive cash flow. He aims for at least a 20% gross profit margin to build cash reserves for repairs and maintain a healthy business bank account. A Smooth Lending Experience: The LendingOne Difference Cedric recounts a notably smooth experience with LendingOne, particularly compared to past interactions with other lenders. He found the process "smoother than I expected it to be," highlighting the ease of online document submission and the efficient communication with his loan officer, Edrony, and underwriter, Pierre. Cedric explained that working with LendingOne was straightforward: "I just went to the website, uploaded... talked with Edrony... supplied additional information... and everything worked out." He praised the entire process from application to closing as "100% fantastic." This positive feedback underscores LendingOne's commitment to efficient and client-focused service.